The Hindu : Karnataka / Bangalore News : Budget: reading the fine print

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Friday, Feb 27, 2009
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Budget: reading the fine print

V. Sridhar

Bangalore: One of the prime highlights of Chief Minister B.S. Yeddyurappa’s budget for 2009-10 was the Rs. 250 crore allocation for subsidised crop loans available to farmers from commercial banks. However, the fine print in the budgetreveals that the allocation is not as impressive as it appears.

In 2008-09, the Government allocated Rs. 150 crore to provide an interest subsidy to cover crop loans extended by cooperative institutions. The subsidy enabled these institutions to price the loans amounting to Rs. 2,650 crore at 3 per cent. Although this provision remains intact, senior officials in the Government told The Hindu that the provision for 2009-10 has been pruned to Rs. 86 crore, a Rs. 64 crore reduction in allocation.

To put things in perspective, if the allocation for the subsidy on cooperative loans had been maintained at last year’s levels, the total subsidy applicable on crop loans — from cooperatives as well commercial bank sources — ought to have been Rs. 400 crore. Instead, it is only Rs. 336 crore.

Senior Government officials familiar with the package told The Hindu that the reduced allocation was “only provisional”. He explained that due to the “competing demands on resources” the Government “had to adjust downward the allocation”. Asked how the allocation of Rs. 150 crore was presented to the Legislature, the source said, “The earlier allocation remained in the budget speech even though it has been provisionally reduced. The Government will allocate more resources if and when there is demand for it.”

According to Government sources the new package for loans from commercial banks would be applicable only for new loans taken after April 1, 2009. The loan size would be capped at Rs. 50,000. A detailed Government Order, setting out the terms and conditions on which such loans would be extended, would be issued after April, said a source. “We have ample time because the crop season would start only in May/June,” he said.

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